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2025 (5) TMI 926 - HC - Indian LawsProceedings initiated under the provisions of the SARFAESI Act - extra ordinary jurisdiction - seeking direction to the bank to renew the overdraft facilities - proposal for One Time Settlement is pending - issuance of notice under Section 14 of the SARFAESI Act - HELD THAT - Having heard the learned counsel appearing for the petitioners and the learned counsel appearing for the respondent bank I am of the view that the petitioners cannot be granted the reliefs sought for in the writ petition. The first relief sought for is for a direction to the respondent bank to consider the proposal for One Time Settlement. A reading of the counter affidavit indicates that the proposal for One Time Settlement was considered and the One Time Settlement was also granted to the petitioners. However the petitioners failed to remit the amounts within the time specified in the sanction issued by the bank. It is settled law that this Court cannot in the exercise of jurisdiction under Article 226 of the Constitution of India direct the bank to extend the time for payment under One Time Settlement even by imposing any additional condition See State Bank of India V. Sham; 2024 (6) KLT 865 . The other relief sought for by the petitioners is for a direction to the bank to renew the overdraft facilities mentioned in prayer No.(ii). Learned counsel appearing for the petitioners states that the overdraft facilities mentioned in prayer No.(ii) of the writ petition have already been renewed. The third relief sought for by the petitioners is to quash Exhibit P6 notice issued by the Advocate Commissioner as the same effectively prevents the petitioners from seeking statutory remedies. The relief of quashing Exhibit P6 cannot be granted as it is settled that on issuance of notice under Section 14 of the SARFAESI Act by the Advocate Commissioner it is open to a borrower to approach the Debts Recovery Tribunal by filing a Securitization Application. Therefore the contention of the petitioners that the issuance of Exhibit P6 notice by the Advocate Commissioner amounts to a negation of their right to avail statutory remedies also cannot be accepted. The writ petition fails and it is accordingly dismissed. I make it clear that the dismissal of this writ petition shall not prevent the petitioners from seeking statutory remedies if so advised. Considering the fact that this writ petition has been pending before this Court from 19.01.2024 till today (02.04.2025) it is directed that if the petitioners wish to avail any statutory remedies the period from 19.01.2024 till today (02.04.2024) shall be excluded for the purposes of determining any period of limitation within which the petitioners had to avail statutory remedies.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Consideration of One Time Settlement Proposal Relevant legal framework and precedents: The SARFAESI Act enables secured creditors to recover dues by enforcing security interests without intervention of courts, but also contemplates settlement proposals such as OTS. The Court's jurisdiction under Article 226 of the Constitution to interfere in such commercial decisions is limited and cannot be exercised to extend or modify terms of OTS once sanctioned. The precedent cited includes State Bank of India v. Sham, which establishes that courts cannot direct extension of time or impose new conditions on OTS agreements. Court's interpretation and reasoning: The Court examined the timeline and facts regarding the OTS proposal. Although the petitioners contended that a proposal was pending at the time of the earlier writ petition, the respondent bank's affidavit clarified that the first OTS proposal was submitted only on 25.11.2024, after the earlier writ petition was disposed of. The bank considered the proposal and sanctioned OTS allowing settlement by payment of Rs. 1.10 Crores by 25.12.2024. The petitioners paid only Rs. 15 lakhs by that deadline, thus defaulting on the terms. Key evidence and findings: The respondent bank's counter affidavit was pivotal in establishing the factual timeline and the bank's consideration of the OTS proposal. The Court relied on this to conclude that the bank had complied with the earlier direction and that no pending proposal was ignored. Application of law to facts: Given the petitioners' failure to comply with the sanctioned OTS terms, the Court held that it could not direct the bank to reconsider or extend the OTS. This aligns with settled law restricting judicial interference in commercial settlements under SARFAESI. Treatment of competing arguments: The petitioners' argument that the OTS proposal was pending at the time of the earlier order was rejected on factual grounds. The Court gave primacy to the bank's affidavit and timeline over the petitioners' submissions. Conclusion: The petitioners are not entitled to a direction for reconsideration or extension of the OTS proposal. Issue 2: Renewal of Overdraft Facilities Relevant legal framework and precedents: Renewal of banking facilities is generally at the discretion of the bank, subject to compliance with terms and conditions. Courts do not ordinarily interfere in such commercial decisions unless there is arbitrariness or illegality. Court's interpretation and reasoning: The petitioners sought a direction to renew overdraft facilities despite alleged defaults such as delayed GST returns. However, learned counsel for the petitioners clarified that the overdraft facilities in question have already been renewed. Key evidence and findings: The Court accepted the statement of the petitioners' counsel that renewal had occurred, thus rendering the relief sought redundant. Application of law to facts: Since renewal was already granted, there was no cause for the Court to intervene. Treatment of competing arguments: No substantial contest on this point as the petitioners themselves acknowledged renewal. Conclusion: No relief granted on this issue as the overdraft facilities have been renewed. Issue 3: Validity of Notice Issued by Advocate Commissioner under Section 14 of SARFAESI Act Relevant legal framework and precedents: Section 14 of the SARFAESI Act empowers the secured creditor to take possession of secured assets after issuance of a notice by an Advocate Commissioner. The borrower's statutory remedies include filing an application before the Debts Recovery Tribunal (DRT) challenging the possession or sale of secured assets. It is settled that issuance of such notice does not bar the borrower from seeking statutory remedies. Court's interpretation and reasoning: The petitioners contended that the notice (Exhibit P6) issued by the Advocate Commissioner effectively prevents them from seeking statutory remedies. The Court rejected this contention, holding that the issuance of notice under Section 14 does not negate the borrower's right to approach the DRT by filing a securitization application. Key evidence and findings: The Court relied on the statutory scheme of the SARFAESI Act and established jurisprudence confirming that possession proceedings and statutory remedies can coexist. Application of law to facts: Since the petitioners retain their statutory rights, the notice is sustainable in law and cannot be quashed merely because it initiates possession proceedings. Treatment of competing arguments: The petitioners' argument was dismissed as contrary to settled legal principles governing SARFAESI proceedings. Conclusion: The notice issued by the Advocate Commissioner is legally valid and not liable to be quashed. 3. SIGNIFICANT HOLDINGS The Court held:
Core principles established include:
Final determinations on each issue were:
Additionally, the Court clarified that dismissal of the writ petition would not bar the petitioners from availing statutory remedies and directed that the period during which the writ petition was pending would be excluded for limitation purposes in pursuing such remedies.
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